Pr. Commissioner Of Income Tax - 2 vs Bharat Copy Centre Pvt Ltd
2023 Latest Caselaw 9332 Bom

2023:BHC-OS:9649-DB                                              1-2-6-ositxa-2127-2018+.doc




                             IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                ORDINARY ORIGINAL CIVIL JURISDICTION
                               INCOME TAX APPEAL (IT) NO. 2127 OF 2018
                                                   WITH
                               INCOME TAX APPEAL (IT) NO. 2128 OF 2018
                                                   WITH
                               INCOME TAX APPEAL (IT) NO. 2234 OF 2018
                 Pr. Commissioner of Income Tax - 2                         ... Appellant
                       Versus
                 Bharat Copy Centre Pvt. Ltd.                               ... Respondent


                 Mr. Suresh Kumar for Appellant.
                 None present for Respondent.


                                               CORAM            K. R. SHRIRAM &
                                                                DR. N. K. GOKHALE, JJ.

                                               DATED:           6th September 2023
                 P.C. :

1. Mr. Suresh Kumar states that Respondent has been served.

Respondent, however, is absent.

2. The Appeal filed is under Section 260A of the Income Tax

Act, 1961 ("the Act"). The following two questions of law are

proposed in the Appeal :

i. Whether on the facts and circumstances of the case and in law, the ITAT has erred in partly allowing the appeal of the revenue against the order of Ld. CIT(A) by restricting the disallowance to 12.5% of unproven purchases without considering the position of law established by Hon'ble Apex Court in the case of N. K. Protiens Ltd. that 100% disallowance on bogus purchases is upheld ?

Gitalaxmi

1-2-6-ositxa-2127-2018+.doc

ii. Whether on the facts and circumstances of the case and in law, the ITAT was right in restricting the addition made by the A.O. to the extent of 12.5% of unproven purchases, without considering the fact that purchases remain unproven and even for the A.Y.'s, the ITAT has upheld disallowance on unproven purchases ?

3. Assessee, as stated in the statement of facts, is engaged in

the business of undertaking labour works in offset printing and

photo copying. Consequent to the information received from the

Sales Tax Department that certain parties are engaged in the

business of providing accommodation bills without actually

supplying the materials and upon noticing that the assessee has

purchased goods from some of such parties in the three years

under consideration, the Assessing Officer ("AO") reopened the

assessments of those three years. Assessee filed its return of

income on 14th October 2010 declaring total income of Rs.

65,25,600/-. AO completed the assessment on 29 th November

2013 by determining the total income at Rs. 1,49,27,100/- after

making certain additions/disallowances. AO disallowed the entire

amount of purchases made from the suspicious dealers in all the

three years by treating them as 'bogus purchases'. For Assessment

Year 2010-2011 it was Rs. 84,01,498/-. Assessee impugned the

assessment order dated 29th November 2013 before the

Commissioner of Income Tax (Appeals) ("CIT(A)"). The CIT(A)

Gitalaxmi

1-2-6-ositxa-2127-2018+.doc

partly allowed the Appeal vide an order dated 18 th November

2015. This was challenged by the Revenue before the Income Tax

Appellate Tribunal ("ITAT"). The ITAT vide its order dated 22nd

September 2017 partly allowed the Appeal of Revenue. This

Appeal has been filed challenging the legality and validity of the

impugned order passed by the ITAT to the extent it was against the

Revenue.

4. AO had noticed that the assessee did not have evidence for

transportation of materials, receipt and consumption of materials.

Assessee could produce only bills and payment details. Assessee

could not obtain confirmation letters from the suppliers to prove

the genuineness of the purchases, nor could it produce those

parties before AO. AO therefore concluded that assessee has failed

to discharge the responsibility to prove the genuineness of

purchases.

5. Admittedly, in this case the assessee had purchased goods

like paper, flex roll, ink, toner, card board and various other

materials required for printing, publishing and photo copying. The

fact that assessee had used those goods has not been disputed.

The ITAT agreed with the findings of CIT(A) that AO having relied

on the details provided by the Sales Tax Department but neither

Gitalaxmi

1-2-6-ositxa-2127-2018+.doc

AO, nor the Sales Tax Department took a stand that the suppliers

do not exist. Therefore, the ITAT came to a conclusion on facts

that there is a possibility that assessee might have saved VAT and

also obtained some discount on purchase price and in this kind of

situation, the principle of taxing the profit embedded in such

purchases covered by the bogus bills, should only be disallowed

instead of disallowing entire expenditure. The CIT(A) also took

this view but adopted the net profit rate for sustaining the

addition. The ITAT modified the order of CIT(A) to adopt the gross

profit level, but retain the addition to the extent of 12.50% of the

value of alleged bogus purchases.

6. The common impugned order of ITAT is for Assessment Years

2009-2010, 2010-2011 and 2011-2012.

7. There are innumerable judgments of this Court and other

High Courts where the Courts have held that the ITAT was correct

in restricting the addition limited to the extent of bringing the

gross profit rate on purchases and not the entire amount paid.

8. Since both the authorities, i.e., the CIT(A) and the ITAT have

held that it is not the entire sales consideration which is to be

brought to tax, but only the profit attributable on the total sales

Gitalaxmi

1-2-6-ositxa-2127-2018+.doc

consideration which alone can be subject to income-tax, the view

taken by the authorities, in our view, is a reasonable and possible

view. Therefore, Appeals dismissed.

                                 (DR. N. K. GOKHALE, J.)                           (K. R. SHRIRAM, J.)
            Digitally signed
            by GITALAXMI
GITALAXMI   KRISHNA
KRISHNA     KOTAWADEKAR
KOTAWADEKAR Date:
            2023.09.08
            17:19:18 +0545





                                Gitalaxmi